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The Search for a GDP metric ex the things you dont like

January 31, 2013

Yesterday the US reported that its 4Q 2012 GDP shrank.  What was really amusing was seeing US analysts come on CNBC (another reason why CNBC is best watched on the “mute” mode) to say that the GDP actually grew by x%, if you ignored this item or that item.  That made this analyst realise that the next holy grail in Economics is coming up with a GDP metric ex this or ex that.  Just like companies do with their one time charges (it is a different matter that these one time charges, particularly at the big banks, occur every quarter and with greater certainty than real earnings).  Or pro-forma earnings.  Or non-GAAP earnings.  Or as the fraudsters at the Federal Reserve define the so-called “core inflation” which ignores the rising food and energy prices in the US over the last four years.

If only the whole world, whether companies or countries, could shift to the Groupon School of Accounting!   All the unhappiness about poor GDP growth or poor EPS growth would disappear.  But wait a minute…did not the former Soviet Union have such metrics in place before the harsh reality could no longer be brushed under the carpet?


From → Credit Analysis

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